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Will CTR Kill Online Advertising?

Are you sick of hearing that online advertising is dead and that no one clicks on banners anymore? Everyone outside the industry seems to think that the click-through rate (CTR) is the best success metric. But simply judging success by CTR is not what it's all about. Some companies make it easier for advertisers and agencies to get a handle on these measurements, but custom success metrics have not yet made it into the mainstream. Here's what advertisers can do.

Honestly, I’m sending my goons after the next person who casually remarks, “Online advertising? It’s dead. No one clicks on banners anymore.”

I saw a comment similar to that in a news article on DoubleClick’s stock woes. It was then that I realized the problem: While the adoption of new online advertising concepts (rich media, sponsorships, etc.) has been fairly swift, the adoption of new success-tracking methodologies has been slow. Everyone outside the industry seems to think that the click-through rate (CTR) is the best success metric we can think of.

I recently had lunch with a colleague who sells space for a major technology portal. He told me about a microsite that his organization built for a major PC manufacturer as part of an ongoing relationship deal. According to this colleague, the PC manufacturer’s ad agency determines success by observing the clicks to the microsite and the PC sales that result from those clicks.

How many people do you know who see an ad for a computer, click on it, and immediately purchase the computer? When last I checked, buying a computer was a major decision that required research, price comparison, and a significant amount of money. People simply don’t buy computers in the same way they might buy a Razor Xtreme scooter from the Sharper Image catalog.

Simply judging success by CTR and impulse purchases is not what I’d expect from a major PC manufacturer. It should be judging that microsite according to how it affects the considerations of the consumer, how it affects brand loyalty, and by the number of purchases made through it over time. Fortunately, companies like Dynamic Logic make it easier for advertisers and agencies to get a handle on these measurements.

The problem is that custom success metrics have not yet made it into the mainstream. Too many advertisers are hung up on CTR. With banner click rates continuing to decline, the popularity of CTR as a success metric has the potential to kill banner advertising entirely (or at least make a serious dent in its perceived effectiveness).

So what do we do?

First of all, I think that the advertisers who are tracking advanced metrics should share their success to the best of their ability. We need some compelling case studies that showcase the Internet as a medium that can affect users’ perceptions of a product or service. (I’d hate to use the “B” word here because I think we need to concentrate not only on branding metrics, but on other success metrics as well.)

Second, I think online advertisers have to avoid caving in to their desire to use CTR as a success metric simply because it’s easy to get that data. We can’t continue to treat almost every online ad campaign like a direct-mail drop.

There’s so much more we can track in this medium than what we’re currently leveraging. If you won’t take my word for it, ask my fellow columnist Jeffrey Graham. When he and I were briefly working at Blue Marble ACG together, Jeffrey wowed me with many of his ideas on how to track the effect of Internet ads on things like purchase intent.

Realizing that no one will ever click on a banner and immediately buy a $45,000 Corvette as a result, Jeffrey started looking at how banner advertising might affect consumer consideration with respect to automobiles. When he showed me his theories, both of us began to think, “Hey, this could be big.”

As it turns out, Jeffrey’s prediction that qualitative metrics would make a big impact on online advertising may turn out to be true. In fact, adoption of these metrics may save the Internet from being pigeonholed as a pure direct-response medium.